Practice Question 2 options:

a)$13.32

b)$20.16

c)$6.84

d)$12.84

Dunlap Company has two divisions, Heating and Mixing. The company's main product is Chemex, a highly abrasive chemical cleaner. The Heating Division makes a chemical that the Mixing Division uses in the production of Chemex. Each division's costs follow: Variable costs per gallon $3.20 $2.50 Fixed cost per gallon $7.50 $3.60 The Mixing Division has been operating at a capacity of 50,000 gallons of Chemex per month and usually purchases 35,000 gallons of chemical from the Heating Division and 15,000 gallons from other suppliers at $12 per gallon. Assuming the method used is 120% of full costs, what is the transfer price per gallon from the Heating Division to the Mixing Division